Exhibit 10.6
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TRANSITION SERVICES AGREEMENT
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THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into as of
August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., a
corporation incorporated under the laws of the Republic of Korea ("HEI"),
Hyundai Electronics America, a California corporation ("HEA," and collectively
with HEI, "Hyundai"), ChipPAC, Inc., a California corporation ("CPI"), ChipPAC
Korea Company Ltd., a corporation incorporated under the laws of the Republic of
Korea ("CPK"), Hyundai Electronics Company (Shanghai) Ltd., a company limited
under the laws of the People's Republic of China ("ChipPAC Shanghai I"), ChipPAC
Assembly and Test (Shanghai) Company, Ltd., a company limited under the laws of
the People's Republic of China ("ChipPAC Shanghai II," and collectively with
ChipPAC Shanghai I, "CPC"), ChipPAC Barbados Limited, a corporation incorporated
under the laws of Barbados ("Barbados"), ChipPAC Limited, a corporation
incorporated under the laws of the Territory of the British Virgin Islands
("BVI"). CPI, CPK, CPC, Barbados and BVI are collectively referred to herein as
the "Companies" and individually as a "Company." Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meaning given such
terms in the Recapitalization Agreement (as defined in the Recitals below).
RECITALS:
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WHEREAS, HEI was the owner of all of the issued and outstanding shares of
capital stock of CPK and all of the outstanding equity interests of ChipPAC
Shanghai I; CPI was the owner of all of the outstanding equity interests of
ChipPAC Shanghai II; and HEA was the owner of all of the issued and outstanding
capital stock of CPI;
WHEREAS, pursuant to the transactions contemplated by that certain
Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999,
by and among HEI, HEA, CPI and ChipPAC Merger Corp., a Delaware corporation (as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, the "Recapitalization Agreement"), the capital structure of each of
CPK, CPC and CPI was reconstituted such that (i) each of CPK, CPC, Barbados and
BVI is now a direct or indirect wholly owned subsidiary of CPI and (ii) HEA now
holds a minority interest in CPI;
WHEREAS, prior to the consummation of the Recapitalization Transactions,
Hyundai and certain of its Affiliates provided certain administrative and other
services to the Companies in connection with the Companies' worldwide
semiconductor packaging and testing businesses (the "Business"); and
WHEREAS, Hyundai and the Companies recognize that it is advisable for
Hyundai and/or certain of its Affiliates to continue to provide certain
administrative and other services to the Companies for a transition period.
NOW, THEREFORE, the Companies and Hyundai hereby agree as follows:
ARTICLE 1
SERVICES PROVIDED
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1.1 Transition Services. Upon the terms and subject to the conditions set
forth in this Agreement, Hyundai will, or will cause its Affiliates to, provide
to the Companies for the Business each of the services listed in Exhibit A,
which is attached hereto and made part of this Agreement (hereinafter referred
to individually as a "Transition Service," and collectively as the "Transition
Services"), during the time period for each Transition Service set forth on
Exhibit A (hereinafter referred to as the "Time Periods" for all of the
Transition Services, and the "Time Period" for each Transition Service).
1.2 Personnel. In providing the Transition Services, Hyundai and its
Affiliates, as they deem necessary or appropriate in their sole discretion, may
(a) use such personnel of Hyundai or its Affiliates and (b) employ the services
of third parties to the extent such third party services are routinely used to
provide similar services to Hyundai's or its Affiliates' business operations or
are reasonably necessary for the efficient performance of any of such Transition
Services.
1.3 Level of Transition Services.
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(a) Hyundai and its Affiliates shall perform the Transition Services
exercising the same degree of care as they exercise in performing the same or
similar services for their own account, with priority equal to that provided to
their own business operations. Nothing in this Agreement shall require Hyundai
or any of its Affiliates to favor the Business over its own business operations.
(b) Unless otherwise specifically set forth in the Exhibits attached
hereto, it is the intention of the parties that a Company's level of use of any
Transition Service that such Company elects to use shall not be higher than the
level of use required by the Business prior to the date hereof. In no event
shall any Company be entitled to any new service or to increase its use of any
of the Transition Services above that level of use without the prior written
consent of Hyundai, which consent may be withheld by Hyundai in its sole
discretion.
1.4 No Obligation to Continue to Use Services.
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(a) Except as otherwise expressly set forth in the Exhibits attached
hereto, none of the Companies shall have any obligation to continue to use any
of the Transition Services, and any Company may delete any Transition Service
from the Transition Services that Hyundai is providing to such Company by giving
Hyundai not less than ten (10) business days' prior written notice of its desire
to delete any or all Transition Services provided to such Company.
(b) If any Transition Service is terminated by a Company, such Company may
not elect to reinstate such Transition Service.
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ARTICLE 2
COMPENSATION
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2.1 Consideration. As consideration for the Transition Services, the
Company to whom the Transition Service is provided (the "Receiving Company")
shall pay to Hyundai the amount specified for each Transition Service as set
forth in Exhibit A. Upon the deletion of any Transition Service in accordance
with paragraph 1.4 above, the compensation to be paid under this paragraph 2.1
shall be reduced by the amount specified for such deleted Transition Service.
2.2 Invoices. Each month during the term of this Agreement, Hyundai
shall submit one invoice (containing itemized entries) to the Receiving Company
for all Transition Services provided to such Company during that month. Such
monthly invoices shall be issued as promptly as practicable following the month
in which such services were rendered. Each invoice shall include itemization in
reasonable detail of the invoiced amounts. Upon request by the appropriate
Receiving Company, Hyundai will provide such further detail regarding any
amounts invoiced pursuant to this paragraph 2.1 as such Company may from time to
time reasonably request, including, without limitation, detail with respect to
any third party billing information relating to the Transition Services provided
under this Agreement. All invoices shall be sent to the appropriate Receiving
Company with a copy to CPI at the following address:
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: Chief Financial Officer
Facsimile: (408) 486-5914
2.3 Payment of Invoices. The appropriate Receiving Company will pay all
amounts due pursuant to this Agreement within thirty (30) days after receipt
of each such invoice hereunder.
ARTICLE 3
CONFIDENTIALITY
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3.1 Obligations. The obligations of confidentiality set forth in
Section 12.5 of the Recapitalization Agreement are hereby incorporated herein by
reference.
3.2 Effectiveness. The foregoing obligations of confidentiality
shall be in effect during the term of this Agreement and any extensions thereof
and for a period of three (3) years after the termination or expiration of this
Agreement.
ARTICLE 4
TERM AND TERMINATION
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4.1 Term. This Agreement shall become effective on the date hereof
and shall remain in force until the expiration of the longest Time Period unless
all of the Transition Services are deleted by the Companies in accordance with
paragraph 1.4 above, or this Agreement is terminated under paragraph 4.2 below
prior to the end of such period.
4.2 Termination.
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(a) If any of Hyundai or its Affiliates, on the one hand, or any of the
Companies, on the other hand (hereafter called the "Defaulting Party"), shall
fail to perform or default in the performance of any of its obligations under
this Agreement, the other party (hereinafter called the "Non-Defaulting Party")
may give written notice to the Defaulting Party specifying the nature of such
failure or default and stating that the Non-Defaulting Party intends to
terminate this Agreement if such failure or default is not cured within thirty
(30) days of such written notice. If any failure or default so specified is not
cured within such thirty (30) day period, the Non-Defaulting Party may elect to
immediately terminate this Agreement or any portion of the Transition Services
described on Exhibit A; provided that if the failure or default relates to a
dispute made in good faith by the Defaulting Party, the Non-Defaulting Party may
not terminate this Agreement pending the resolution of such dispute.
(b) Either Hyundai or the Companies may immediately terminate this
Agreement by a written notice to the other without any prior notice upon the
occurrence of any of the following events: (i) the other party enters into
proceedings in bankruptcy or insolvency; (ii) the other party shall make an
assignment for the benefit of creditors; (iii) a petition shall be filed against
the other party under a bankruptcy law, a corporate reorganization law, or any
other law for relief of debtors (or similar law in purpose or effect), which
petition has not been dismissed or discharged within sixty (60) days after the
filing thereof; (iv) the other party enters into liquidation or dissolution
proceedings; or (v) sale or transfer to an unaffiliated third party of a
majority of the assets or capital stock or voting power of CPI, whether by
merger, stock or asset purchase or otherwise. In addition, the Companies may
terminate the Export and Consulting Services on the terms and subject to the
conditions set forth in Exhibit A.
4.3 Survival of Certain Obligations. Without prejudice to the survival of
the other agreements of the parties, the following obligations shall survive the
termination of this Agreement: (a) for the period set forth therein, the
obligations of each party under Articles 3 and 4 and (b) Hyundai's right to
receive the compensation for the Transition Services delivered to the Companies
(as described in paragraph 2.1 above) incurred prior to the date of termination.
ARTICLE 5
MISCELLANEOUS
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5.1 Amendments. This Agreement shall not be amended or modified
except in writing signed by the parties hereto.
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5.2 Successors and Assignment. This Agreement shall be binding and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party may assign any of its rights or duties pursuant to this
Agreement without the prior written consent of the other party hereto; provided
that any Company may assign its rights under this Agreement as collateral
security to any Company's or its Affiliates' financing sources.
5.3 Entire Agreement. This Agreement and the schedules and exhibits
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein.
5.4 Notices. Except as otherwise provided in paragraph 2.1 hereof
(with respect to delivery of invoices), any notice, demand or request required
or permitted to be given under the provisions of this Agreement shall be in
writing, including by facsimile, and shall be deemed to have been duly delivered
and received on the date of personal delivery, on the day after delivery to a
nationally recognized overnight courier service if sent by an overnight delivery
service for next morning delivery or when dispatched by facsimile transmission
(with the facsimile transmission confirmation being deemed conclusive evidence
of such dispatch) and shall be addressed to the following address, or to such
other address as any party may request, in the case of Hyundai, by notifying the
Companies, and in the case of the Companies, by notifying Hyundai:
To the Companies: ChipPAC Limited
Craigmuir Chambers
P.O. Box 71
Road Town, Tortola
British Virgin Islands
Attention: Richard Parsons
Facsimile: (284) 494-7906
ChipPAC, Inc.
3151 Coronado Drive
Santa Clara, California 95054
U.S.A.
Attention: Chief Financial Officer
Facsimile: (408) 486-5914
and
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Copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes, P.C.
Gary M. Holihan
Fax: (312) 861-2200
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To Hyundai: Hyundai Electronics America
3101 North First Street
San Jose, California 95134
U.S.A.
Attention: Dr. C.S. Park
Facsimile: (408) 232-8101
and
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Hyundai Electronic Industries, Co., Ltd.
San 136-1
Amri-ri, Bubal-eub
Ichon-si
Kyoungki-do, 467-71 Korea
Attention: Y.H. Kim, Chief Executive Officer
Copy to: Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
U.S.A.
Attention: Rod J. Howard
Facsimile: (650) 496-2777
5.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to a contract
executed and performed entirely in such state, without giving effect to the
conflicts of laws principles thereof and each of the parties hereto submits to
jurisdiction in any state or federal court located in the State of California
and waives any claim of improper jurisdiction or lack of venue in connection
with any claim or controversy which may be brought in connection with this
Agreement.
5.6 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
5.7 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
5.8 Counterparts. This Agreement may be executed in two or more
counterparts (any one of which may be by facsimile), each of which will be
deemed an original and all of which together will constitute one and the same
instrument.
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5.9 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity other than the parties hereto and their permitted successors or
permitted assigns, any rights or remedies under or by reason of this Agreement.
5.10 Reservation of Rights. Either party's waiver of any of its
remedies afforded hereunder or at law is without prejudice and shall not operate
to waive any other remedies which that party shall have available to it, nor
shall such waiver operate to waive the party's rights to any remedies due to a
future breach, whether of a similar or different nature.
5.11 Dealings with Third Parties. Neither party is, nor shall hold
itself out to others to be, vested with any power, authority, or right to bind
contractually or to act on behalf of the other party as its broker, agent, or
otherwise for the purpose of committing, selling, conveying, or transferring any
of the other party's assets or property, contracting for or in the name of the
other party, or making any representation binding upon such other party.
5.12 Conflict. In case of conflict between the terms and conditions
of this Agreement and any schedule or exhibit hereto, the terms and conditions
of such exhibit or schedule shall control and govern as it relates to the
Transition Service to which those terms and conditions apply.
5.13 Remedies. Each of the parties to this Agreement acknowledges and
agrees that the Companies would be damaged irreparably in the event any of the
covenants or agreements of Hyundai under this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties hereto agrees that the Companies shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement by Hyundai and to enforce specifically this Agreement and the terms
and provisions hereof in any competent court having jurisdiction over the
parties.
5.14 Arbitration. The terms and conditions of the arbitration
provisions of paragraph 10.8 of the Recapitalization Agreement are incorporated
herein by reference.
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IN WITNESS WHEREOF, the parties hereto have executed this Transition
Services Agreement as of the date first above written.
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
/s/ Dr. C.S. Park
By: ____________________________________
Name: Dr. C.S. Park
Title: Executive Vice President
HYUNDAI ELECTRONICS AMERICA
/s/ Dr. C.S. Park
By: ____________________________________
Name: Dr. C.S. Park
Title: President
CHIPPAC LIMITED
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
CHIPPAC, INC.
/s/ Gary Breton
By: ____________________________________
Gary Breton
Name: __________________________________
Title: _________________________________
CHIPPAC KOREA COMPANY LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
HYUNDAI ELECTRONICS COMPANY (SHANGHAI)
LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
CHIPPAC ASSEMBLY AND TEST (SHANGHAI)
COMPANY, LTD.
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
CHIPPAC BARBADOS LIMITED
/s/ P.J. Kim
By: ____________________________________
P.J. Kim
Name: __________________________________
Title: _________________________________
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EXHIBIT A
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SEE ATTACHED
SERVICE TO BE PROVIDED: Transit Insurance.
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Fire & Marine to provide to the Companies transit insurance on inventory
and capital equipment shipped by CPK or CPC.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Transit Insurance to be provided, the
Receiving Company shall pay Hyundai Fire & Marine on a transaction basis at
Hyundai Fire & Marine's prevailing market insurance rates.
SERVICE TO BE PROVIDED: Water Freight Services.
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Merchant Marine to provide to the Companies water freight service for
transport of raw materials and fixed assets between CPK and CPC.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Water Freight Services to be provided,
the Receiving Company shall pay Hyundai Merchant Marine on a transaction basis
at Hyundai Merchant Marine's prevailing market freight rates.
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SERVICE TO BE PROVIDED: Uniforms and Travel Services
DESCRIPTION OF SERVICES: HEI shall use commercially reasonable efforts to cause
Hyundai Department Store to provide uniforms and travel services for CPK's
employees.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Uniform and Travel Services to be
provided, CPK shall pay Hyundai Department Store the purchase order value (which
shall not be greater than market value) of the uniforms and the prevailing
market value of the travel services.
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SERVICE TO BE PROVIDED: Office Space in Japan
DESCRIPTION OF SERVICES: Hyundai shall cause Hyundai Electronics Japan to share
its current office space (or any replacement therefor) to house the Companies'
operation of the Business in Japan.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: The Office Space in Japan shall be made available based on the
Prorated Facility Cost. "Prorated Facility Cost" means Hyundai Electronics
Japan's actual out-of-pocket costs for (i) rent of the premises, (ii) electric,
gas and water utility charges for the premises and (iii) janitorial charges for
the premises, each prorated based upon a fraction, the numerator of which shall
be the number of employees performing services (on a full time basis) in
connection with the Business at the end of the preceding month and the
denominator of which shall be the number of total employees working at the
Office Space.
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SERVICE TO BE PROVIDED: Services of Employees in Japan
DESCRIPTION OF SERVICES: So long as the employees of Hyundai Electronics Japan
currently performing services for the Business remain employees of Hyundai
Electronics Japan, Hyundai shall cause Hyundai Electronics Japan to make such
persons available on a full time basis to perform services for the Business. At
the Companies' request, Hyundai shall further cause Hyundai Electronics Japan to
hire and retain up to three more employees to perform, on a full time basis,
other services for the Business as the Companies may designate; provided that
the obligation of Hyundai Electronics Japan in such capacity shall be limited
solely to serve as the employer of such employees and will not include the
obligation to recruit any such employee. Any work required in connection with
the recruitment of employees to perform services for the Business shall be the
responsibility of the Companies.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the services to be provided by the
employees mentioned above, the Receiving Company or its designee shall reimburse
Hyundai Electronics Japan an amount equal to the Employment Costs for each such
employee. "Employment Costs" means the actual out-of-pocket employment costs
incurred by Hyundai Electronics Japan with respect such employee with respect to
(i) salary and wages, (ii) employee reimbursement expenses and (iii) the
employer's portion of (A) all payroll taxes, (B) all retirement plan
contributions and (C) medical insurance premiums.
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SERVICE TO BE PROVIDED: Export and Consulting Services
DESCRIPTION OF SERVICES: During the term set forth below, the Companies shall
engage HEI (and/or an HEI Affiliate designated by HEI) to act as the exporter of
record for all of the Companies' exports out of Korea and, in connection
therewith, the Companies shall (and HEI and/or its Affiliates shall permit the
Companies to) use the Hyundai name for purposes of obtaining export permits and
customs certificates and reporting exports to government agencies and to third
parties (the "Export Reporting Services"), it being understood and agreed that
nothing in this sentence shall require HEI or any of its Affiliates to provide
greater Export Reporting Services than heretofore provided to ChipPAC, Inc.,
ChipPAC Korea and ChipPAC Shanghai by Hyundai Corporation. In addition, at the
Companies' request, HEI shall provide to the Companies (i) additional Export
Reporting Services (greater than those heretofore provided) and (ii) other
export-related consulting services through its headquarters and worldwide
overseas branches with respect to promotion, financing, advertising, collection
of payments, products repair service arrangements, local practices and other
functions related to the Business as the Companies may reasonably request (the
services in clauses (i) and (ii) collectively, the "Other Export-Related
Services"). The Export Reporting Services and the Other Export-Related Services
may be provided by HEI either directly or, in HEI's discretion, through one or
more of its Affiliates, at the direction of HEI, but HEI shall have
responsibility for seeing that such services are performed.
TIME PERIOD:
Export Reporting Services: HEI shall provide, and the Companies hereby engage
HEI to provide, the Export Reporting Services for the thirty-six (36) month
period commencing on the date of this Agreement, such period to be automatically
extended from year to year thereafter unless written notice of termination is
given not less than six (6) months prior to the end of such year; provided that
if the Companies reasonably determine that the continuation of such services
will deprive the Companies of an economic benefit with a value to the Companies
of more than one hundred thousand dollars ($100,000) per year (the "Threshold
Amount") that cannot otherwise be obtained as long as such services are provided
through HEI or its Affiliates, then prior to the expiration of such thirty-six
(36) month period or any extension thereof, (i) the Companies may give written
notice of such loss (which notice shall include the amount of such loss) to HEI;
(ii) HEI shall have the right (but not the obligation) to agree to compensate
the Companies for the full amount of such loss (without regard to the Threshold
Amount) and any ongoing losses that may be incurred by the Companies as a result
of continuing to receive such services from HEI or its Affiliates and shall
notify the Companies of its election within sixty (60) days after receipt of
notice from the Companies described in clause (i); and (iii) if HEI declines to
compensate the Companies for any such loss, then the Companies shall have the
right to terminate the Export Reporting Services upon three (3) months' written
notice to HEI.
Other Export-Related Services: HEI shall make available to the Companies, upon
request, the Other Export Related Services during the twelve (12) month period
following the date of this Agreement.
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COST OF SERVICE: In consideration of the Export and Consulting Services
(including both the Export Reporting Services and the Other Export-Related
Services) and upon presentation of a detailed invoice itemizing each service
provided and the time charges and out-of-pocket expenses incurred in providing
such service, the Receiving Company shall pay HEI an amount equal to the lesser
of (i) the actual cost of the Other Export-Related Services (consisting of the
prorated salary cost of employees devoted to providing such Other Export-Related
Services, plus actual out-of-pocket expenses incurred in providing such Other
Export-Related Services) and (ii) 0.25% of the declared value of the exported
goods with respect to which the Other Export-Related Services were provided.
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SERVICE TO BE PROVIDED: Other Services
DESCRIPTION OF SERVICES: Hyundai will, and will cause its Affiliates to,
provide to the Companies, upon the request of the Companies, any other services
not specifically set forth in this Agreement, to the extent such services were
provided by Hyundai or any of its Affiliates to the Business at any time during
the twelve month period ended on the Closing Date.
TIME PERIOD: These Transition Services shall be made available during the
twelve month period following the date of this Agreement.
COST OF SERVICE: In consideration of the Other Services to be provided, the
Receiving Company shall reimburse Hyundai an amount equal to the out-of-pocket
costs paid by Hyundai to any third party in providing such services.
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